Flat Start After Monday’s Bull Flattening

TYU2 operates just below late Monday highs shortly after the re-open, dealing +0-06+ at 121-18.

• To reap, cash Tsys were 1-11bp richer come the close on Monday, bull flattening as 20s outperformed.
• Sino-U.S. tensions allowed the space to stabilise then unwind its early losses on Monday, with numerous source reports suggesting that U.S. House Speaker Pelosi will visit Taiwan on Tuesday factoring into risk-negative price action. Elsewhere, a softer than expected prices paid component in the latest ISM m’fing survey and a pull lower in crude oil futures also helped the bid.
• The previously mentioned outperformance in 20s was linked to expectations surrounding cuts in auction size at Wednesday’s quarterly refunding announcement.
• Flow also factored into the wider curve dynamic, with block flatteners noted in both FV/US & FV/TY. The latter round of flow allowed TY futures to extend to fresh session highs into the bell.
• Hedging flows surrounding multi-tranche $IG issuance from Apple & UBS also boosted activity.
• Looking ahead, the latest RBA monetary policy decision headlines today’s Asia-Pac docket, with a 50bp hike the consensus call. Further out, Tuesday’s NY session will see the release of JOLTS job opening data, in addition to several rounds of Fedspeak (Bullard, Evans & Mester).